FREE: Why Myanmar’s revised foreign investment law is over-hyped

Author: | Published: 20 Mar 2012

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Market participants in Myanmar are querying the validity of
an alleged new draft of Myanmar’s foreign
investment law,
obtained and leaked by Reuters last week, and have
branded the significance of the proposed changes as
over-hyped.

Among
a series of changes proposed in the draft investment bill
are provisions allowing foreigners to set up businesses in
Myanmar without local partners. Reforms also include a
five-year tax exemption for foreign companies, government
guarantees against nationalisation, easing of restrictions on
private land use and repatriation of profits.

The draft would now need to be approved by parliament and
signed into law by the president Thein Sein - a process which
is expected to be finalised by mid-April.

One Yangon-based law firm partner said the validity of the
news was uncertain given the leak related to confidential
inter-parliamentary discussions. He also questioned the
international reaction to the news.

"Many are saying this is a huge change, but to me it is not
game-changing at all," he said. "The changes proposed are not
drastically different to Myanmar’s Foreign
Investment Law of 1988."

"With so much else changing in Myanmar it is hard to say if
these changes will make much difference," he said.

Thura Soe-Paing, managing director of All Myanmar Investment
& Development Partners, an affiliate of Singapore-based
investment company Frontier Investment and Development
Partners, agreed the reported changes were only cosmetic.

"The common perception is that reforms in Myanmar are
happening very fast, but people here are complaining it is
going too slowly," he said. "Economically things
haven’t changed that much. Banking laws are
still antiquated and there is still little transparency as to
what the reform agenda or timeframe is."

DFDL Mekong’s James Finch said the draft foreign
investment law were consistent with earlier laws, but by and
large just represented a liberalisation of the provisions in
the Myanmar Foreign Investment Law of 1988.

"This will mushroom in the coming months and years as it did
in Vietnam from a single document to literally volumes of
decrees, notifications, instructions on all sorts of matters
related directly or indirectly to foreign investment," said
Tonkin, who is also the former British Ambassador to
Thailand, Vietnam and Laos.

Soe-Paing said the proposed foreign investment law revisions
were likely to have a positive effect on foreign investment
in the country. Nothing unworkable had been suggested and
some changes, such as allowing foreign shareholders and
directors, would make direct investment in Myanmar companies
easier, he said.

But he said other reforms were much more significant. The
dual exchange rate for the local kyat currency currently in
operation in the country was a bigger concern to would-be
investors than foreign investment legislation, for
example.

To that end, Myanmar's central bank
is set to introduce currency reform, unifying up to seven
different rates used by business, government and consumers on
April 1. These reforms will set the country's new exchange
rate at around 820 kyat per US dollar, close to its black
market level. The official rate is currently at about 6.4
kyat to the US dollar, based on a 35-year peg to
International Monetary Fund special drawing rights.

Finch added that debates within the Myanmar government as
whether or not it should adhere to the New York Convention
on Arbitration of 1958 were also significant. "Such
adherence would open the country to numerous investors,
particularly those who would help it achieve sustainable
growth," he said.